Blockchain and the Internet of Things (IOT)

It’s pretty much a done deal that there will be an incredible number of ‘smart’ (aka “internet of things” or IOT) devices connected through the internet in short order. For example, Cisco predicts there will be 50 BILLION such interconnected devices by 2020.  However, there are serious questions of security, privacy, data integrity, and scalability associated with this growth.

Enter blockchain, which offers several attractive characteristics that could securely enable the parabolic growth in IOT devices. The Bitcoin blockchain doesn’t quite fit the bill here – but blockchain technologies such as Ethereum and Hyperledger, with their built-in support for “smart contracts” (distributed code that executes when defined conditions are met), seem quite promising.

The potential applications of IOT and blockchain seem limitless. Appliances that sense they need repair and contact maintenance -and even schedule a repairman visit, pharmaceuticals equipped with NFC (Near Field Communications – the kind you see used for Apple Pay) tracked throughout the supply chain from ingredients to consumer, the aggregation of individual pollution monitoring IOT devices for accurate detection of air quality. The IOT/Blockchain combination could power the “prosumer” movement (for example: I’m not using my car for a few days – maybe someone out there wants to rent it).  An MIT research paper discusses how smart drones could use the blockchain to decide what to do as a group, and IBM is developing Watson (AI) IOT platforms (both shades of SkyNet)!

A lot of collaborative work remains to be done – but there are already several consortiums plowing ahead.

 

Here is additional information on new technologies being used for health improvements.

Initial Coin Offerings (ICOs)

NOTE: see Postscript at bottom for update on 6.4.17.

Increasingly over the past 2 years, several start-up companies are obtaining capital via something known as an ICO (Initial Coin Offering). ICO’s essentially combine crowd-sourcing with blockchain technology. Here’s how an ICO works:  suppose a start-up (say ACME Blockbuster) wants to raise money for development of it’s product or service (whatever that happens to be).  ACME can short-circuit the long, arduous task of getting funds from Venture Capitalists by simply announcing that in – say 30 days –  it will issue “coins” to the public at an initial offering price of $X dollars or $Y Bitcoin. ACME offers some information about what it plans to do with the funds raised usually via a “white paper” on its website, and also gives other details such as how many ACME coins the company plans to offer to the public and how many coins ACME will retain.  But one key point: this is basically an initial public offering without virtually any government oversight – including none of the normal SEC filings an IPO would  entail.

The “ACME coins” are really tokens on a blockchain (e.g. Ethereum, Bitcoin). In our example, the investors would buy ACME tokens using fiat money (e.g. US dollars) or crypto-currency (e.g. Ethereum Ether, Bitcoins) at ACME’s initial offering price.  The “ICO industry” already has some service companies sprouting up – such as ICOO, to improve the liquidity of these tokens.

Now, your “ACME tokens” are kind of like shares in a company – but it is a little hazy as to what your ‘token holder’ rights are.  You are basically in the game to speculate: if ACME starts getting results in whatever product/service it is offering- the tokens will fetch higher dollar or Bitcoin prices.  But don’t expect “stockolder meetings” or SEC filings or anything like that. Interestingly, however, there is an ICO ratings organization already in place.

You can raise a lot of money very fast using an ICO.  Digital Capital raised $10M in six hours. 2016 blockchain startups Monero and NEM both had 2,000% increases in value.

There are already exotic variations on above well beyond Blocktonite’s expertise – and, as with the rest of the blockchain world, things are happening incredibly fast.

 

 

 POSTSCRIPT 6.4.17: a couple of recent articles in the Financial Times are must read items prior to investing in any ICO’s or “distributed autonomous organizations (DAOs: which FT likens to automated Ponzi schemes).  Bottom line: unless you are one of the few people that really understand both blockchain technology at an organic level – and the contracts these ICO’s are pro-offering, (or you have money to burn) – stay away!

Supply Chains and Blockchain

 

 

There are a growing number of companies and organizations experimenting with the application of blockchains to several types of supply chains. At least on paper, blockchain is a perfect fit for the process of tracking raw materials, through manufacturing, distribution, purchase, consumption and use by customers – along with all the logistics in between these steps.

By having the particular suppliers, transportation companies, import/export and other government agencies, distributors, wholesalers and retailers who participate in any given supply chain on a blockchain – it becomes far easier to a) ensure invoices are accurate, b) trace foods back to the source (e.g. to limit health risks – and prevent deaths like those from a 2012 episode of e-coli infected spinach), c) authenticate the resources in goods (e.g. ensure the absence of “blood diamonds” in jewelry), and d) lower the “frictional cost” of erroneous paperwork (bills of lading, manifests, etc.).

If there’s one company at the center of applying blockchain technology to supply chain integrity – it’s IBM.  IBM is testing ‘blockchain powered supply chains’ out with WalMart (tracking Chinese pork from source to consumer), Maersk (replacing the mountains of paperwork as goods get shipped across land, sea, ports and borders),IBM’s own Global Finance division (payment dispute resolution), Heija (Chinese supply chain management company), and several other projects.  In addition, there are several start-ups focused on supply chain blockchains – including Provenance, Consensys, and Everledger.

Blockchain and Energy

Energy is another industry sector where there is an accelerating amount of development, prototyping, discussion and (probably) hype regarding the use of blockchain.  Just on our little site here at Blocktonite, we’ve catalogued over 65 articles, a dozen start-ups, and innumerable videos on energy and blockchain.

Right now, there are two emerging uses, and both represent the ability of open exchanges for people to sell and buy energy directly from each other (you have to wonder what utility companies think about this).  In one use, solar panel owners offer any surplus Renewable Energy Credits (RECs) they may have earned to anyone who want them.  In this case, the buyer is effectively buying a tax credit.  The advantage of this approach is that it doesn’t require a fundamental change in the existing power grid utility infrastructure. I might buy via the blockchain windmill RECs generated by a windmill farm 2,000 miles away.  The best example of this use is a pilot that a start-up called LO3 Energy  is conducting in conjunction with blockchain developer Consensys and literally a street of houses in Brooklyn NY.

The second use case is more interesting.  In this approach, a community has their own “microgrid” that everyone is hooked into, and all the houses have smart meters. Suppose I have excess power available from my solar panel, and suppose you need power.  You and I can have a “smart contract” on the blockchain supporting the microgrid – so that you get power from me when I have it and you need it. You can even customize your power consumption in line with your priorities (e.g. heat, the economy, cost). The blockchain allows me (the energy seller) to collect currency tokens that I can use elsewhere.  This use case is also on the drawing board for LO3, along with other energy startups like Gridularity, Scanergy, Power Ledger, and several others.

But the overall point is this: one broad application of blockchain enabled “distributed ledgers” is the facilitation of direct so-called “prosumer to consumer” economies,  taking us to the “next step” beyond Uber, Lyft, AirBnB to the true “gig economy”.

 

Certifying Documents and Blockchain

Here’s one example, among dozens identified to date, of using blockchain technology. Say you receive a document from me that’s rather important, say – a contract. You want to validate that the document you received was indeed written by me, and neither you nor me want to spend the time and money to have a trusted third party (like the guy in the picture above) to essentially notarize the document.  A start-up company known as Stampery has developed a Microsoft Add-in to support this type of scenario using blockchain.

Here’s how it works: say I compose the contract in Microsoft Word. When I’m done, I click a button in Word (the Stampery add-in) which then “hashes” the document. A hash is a mathematical technique of creating a fixed block of characters (which will seem random to any viewer or software program) based on an input file (in this case, my contract).  In this specific case, the “hash” is 256 seemingly random characters that represents my contract.  This hash is then stored on the Bitcoin blockchain.

Now – I send the contract in Word format to you.  You can read the document in Word, but you want to be certain of the document’s validity.  You click the Stampery add-in button “certify” – which then applies the exact same hashing technique to the document you are reading, then compares that document to the hashed version on the Bitcoin blockchain.  If the two hashes match, you get a message certifying the document I sent you.

This all may not sound too glamorous – but it is the “immutability” characteristic of the blockchain which assure document authenticity – and for a whole lot less time and money.

Music and Blockchain

 

One of the “industry verticals” that Blocktonite is tracking is the broad area of applications to protect intellectual property (IP). And within IP, the music business is one area of growing interest. The issue: unless you are the Rolling Stones, artists today get a ever decreasing fraction of the royalties due them when their song is played, or covered by another band, or their lyrics are used, or their work is used by advertisers, etc. Some musicians (such as Imogen Heap, Nick Mason (Pink Floyd), 22Hertz, and others) have spoken out in favor of using blockchain technology to manage the distribution and use of music, and making this usage far more transparent and fair. Mycelia is one group of musical artists promoting blockchain use, and one start-up, UjoMusic, is working on developing a streaming service based on blockchain smart contract technology. 22Hertz has created hashes of some of their songs (both lyrics and melody) as proof  of their ownership.

This past week the whole notion of using blockchain for rights management in music got a boost when ASCAP, SACEM and PRS announced a joint blockchain project to improve data accuracy for music rightsholders (such as artists).

4/19/17: here’s an update. Yesterday Tokenly announced a new music service using blockchain: Token.FM. I just signed up – we’ll see how it works.

Blockchain Industry Verticals

I started tracking potential applications of blockchain technology in August, 2016.  I now have articles and/or documents on blockchain use in 57 application areas (see table below).  This doesn’t count the fact that I have 32 sub-categories in the area of Finance and 18 areas within Healthcare.

Industry Vertical Date Indexed:
Advertising – Marketing 4/4/2017
Agriculture and Food 4/4/2017
Artificial Intelligence 4/4/2017
Airlines 4/4/2017
Analytics 4/4/2017
Art 4/4/2017
Articles on Multiple Applications 4/4/2017
Asset Ownership 4/4/2017
Auctions 4/4/2017
Audit 4/4/2017
Autos and Smart Cars 4/4/2017
Commodoties 4/4/2017
CRM 4/4/2017
Crowdfunding 4/4/2017
Clubs 4/4/2017
Defense 4/4/2017
Document Mgt 4/4/2017
Education 4/4/2017
Email 4/4/2017
Employment-Recruitment 4/4/2017
Energy 4/4/2017
Environment 4/4/2017
FINANCE (32) 4.4.17 4/4/2017
Federal Gov Apps 4/4/2017
Gambling 4/4/2017
Gaming 4/4/2017
Gun Control 4/4/2017
HEALTHCARE (18) 4.4.17 4/4/2017
Hotel Reservations 4/4/2017
Human Resources 4/4/2017
Immigration 4/4/2017
Insurance 4/4/2017
Intellectual Property 4/4/2017
Internet of Things 4/4/2017
Journalism 4/4/2017
Lottery 4/4/2017
Loyalty 4/4/2017
Mining 4/4/2017
Music 4/4/2017
News and Journalism 4/4/2017
NotForProfit 4/4/2017
Person As A Service 4/4/2017
Public Sector 4/4/2017
Real Estate 4/4/2017
Referrals 4/4/2017
Rentals 4/4/2017
Retail 4/4/2017
Shipping and Logistics 4/4/2017
Social Networks 4/4/2017
Sports 4/4/2017
Supply Chain (includes Procurement) 4/4/2017
Telcos 4/4/2017
Third World 4/4/2017
Ticket Sales 4/4/2017
Tourism / Travel 4/4/2017
Voting 4/4/2017

Provider Network Directories

This article in today (12.4.16) NY Times illustrates a problem that could be addressed via blockchain technology.